Deduction for Self Employed Health Insurance bought through Marketplace

[MegaX8]

Hi

I own a business (S-corp so I get K1) and paid for Health insurance that I bought through NY State Marketplace. I entered 1095-A info as TurboTax requested and it calculated the credit correctly. However the rest of the the deduction doesn't go to line 17 Schedule 1 in order to get deducted from Business income. It goes into regular "Medical Expenses" that need to itemized and I subject to 7.5% of AGI rules. I tried to edit line 17 manually through Forms but TurboTax doesn't let me do so. Is that a bug? I'm using TurboTax Home & Business 2023.

Thanks

[MinhT1]

As a greater than 2% shareholder of a S-Corp, your health insurance premiums may be deductible as Self-employed health insurance.

To claim this deduction, the health insurance premiums must be paid or reimbursed by the S corporation and reported as taxable compensation in box 1 of your W-2.

Revisit your K-1 entry until you get to the page Describe this Partnership. Check the box I personally paid health insurance and/or long-term care insurance premiums for myself and my family. and click Continue. 

On the next page, enter only your Medicare Wages (box 5 of your form W-2), but do not enter your Marketplace premiums here. The Marketplace premiums are entered in the 1095-A section.

Then revisit the entry of your form 1095-A. 

After entering your form 1095-A, you will come to a page titled Let us know if these situations apply to you?. Put a checkmark on I'm self-employed and bought a Marketplace plan and click Continue.

On the next page Which business was associated with this policy?, put a checkmark on Income from my S-Corporation and choose your S-Corp and the beginning and ending months of activity of your S-Corp.

Please note that the premiums are deductible only if you are a more than 2% shareholder of your S-Corp and you receive a form W-2 from your S-Corp, and they are deductible only up to the amount of your share in the profit of the S-Corp as reported on your K-1.

Please read this TurboTax Help article for more information.

@MegaX8

[Edited 3/25/24 | 11:28 AM PST]

[MegaX8]

It specifically says that I shouldn't enter any info there if I bought health insurance from the Marketplace.

[VolvoGirl]

Did you check the box for self employment when you entered the 1095A?  

You only enter it from the 1095-A. When you enter the 1095A there should be a box to check for self employment. If you enter the 1095-A and select the "Self-employed and bought a Marketplace plan" box, it will automatically include those premiums in the SE Health Insurance section. So you shouldn't enter it again on schedule C.

[MegaX8]

Yes I checked the box. Then there's another screen that asks me which business was associated with the policy and the dates business was operational. I pick the S-corp because it has income to deduct from and January 2023 to December 2023 dates. Then another screen shows me my credit for insurance premiums and that's it. 

Once I go back to main deductions screen, the amount is in the regular "Medical Expenses".

[MinhT1]

In TurboTax Online, you can preview your form 1040 by following these steps:

1. Open your return
2. In the left-hand column, locate Tax Tools, click on the drop-down arrow then click on Tools
3. On the Tools Center page, click on View Tax Summary
4. In the left-hand column, click on Preview my 1040
5. Your form 1040 will display.
6. Scroll down to line 17 of Schedule 1 and you should see the amount of this deduction on this line.

[MegaX8]

The deduction is 0, which is what the problem is. And I can't edit the actual numbers manually in the forms in TurboTax

[MinhT1]

Were you paid a salary or wages by the S-Corp and did you receive a form W-2 from the S-Corp?

To be deductible, the health insurance premiums must be paid or reimbursed by the S corporation and reported as taxable compensation in box 1 of your W-2.

[MegaX8]

Yes, my W2 box 1 shows the salary amount combined with the health insurance expense that was paid. 

[MegaX8]

I compared the tax returns if I try to deduct health insurance from S-corp K1 to another tax return where I'm deducting health insurance from LLC income. Looks like for K1 version doesn't generate form 7206 so the deduction doesn't flow to line 17 of schedule 1.

[CatinaT1 · Accepted solution]

This is a know issue. You can sign up for updates here: Why isn't my MAGI on Form 8582 not including my full self-employment health deduction?